AGRIBUSINESS

The agribusiness industry includes all those
activities performed to produce, process, and
distribute food and fiber. Harvard's John H.
Davis and Ray A. Goldberg first used the term
agribusiness in 1957, and its scope continues to
evolve and now includes the following distinct
yet interrelated sectors: inputs, production,
processing-manufacturing, and distribution.

The input sectors include those firms that
sell feed, seed, equipment, credit, insurance,
chemicals, and other inputs to producers. The
farmers and ranchers who produce raw commodities
comprise the production sector. The
processing-manufacturing sector includes
those firms that process commodities into basic
ingredients and basic ingredients into final
consumer products. Finally, the wholesalers,
distributors, and retailers who bring finished
products to consumers represent the distribution
sector.

As agricultural e.ciency continues to improve,
the number of people engaged directly
in production agriculture continues to decline,
now accounting for only about 1.5 percent
of the U.S. population. However, according
to the U.S. Department of Agriculture, as a
whole the agribusiness industry is the single
largest industry in the U.S. economy, accounting
for over 17 percent of employment and
over 14 percent of gross national product.
Throughout the Great Plains region, agribusiness
is an even larger economic engine. For
example, 25 percent of the employment in Nebraska
is dependent on agribusiness.

Although all four sectors of agribusiness are
important in the Great Plains, production and
processing-manufacturing form the foundation.
In particular, the expansive scope of agribusiness
in the Great Plains is driven by the
regional importance of agricultural production
and the economic necessity of locating a
significant share of the input and processing-manufacturing
sectors near production. It follows
that an appreciation of agribusiness in
the Great Plains must begin with an appreciation
of agriculture in the Great Plains.

The Great Plains is an important region for
the production of many types of livestock,
poultry, dairy, and food and feed grains. For
example, eastern Nebraska is a major cornand
soybean-producing region, and oats and
barley are mainstay crops in North Dakota
and the Prairie Provinces of Canada. However,
from Texas to the Prairie Provinces, cattle
and wheat are the quintessential agricultural
commodities of the Great Plains.

Mixed- and shortgrass prairies once dominated
the Great Plains, with the tallgrass prairies
lying mainly to the east. Climate, most
notably rainfall, dictated this delineation.
While the original grasslands have largely disappeared,
they remain marked by the crops
that have replaced them. Corn grows where
tallgrass prairies once flourished (and in irrigated
outliers farther west), while wheat is the
dominant crop of the former mixed- and
shortgrass prairies of the Great Plains, with
North Dakota, Kansas, and Montana the leading
U.S. producers. Similarly in Canada, the
Prairie Provinces of Alberta, Saskatchewan,
and Manitoba produce twenty times the wheat
output of the rest of the nation. The Plains,
which once supported North America's great
bison herds, are today the epicenter of North
American cattle production, led in the United
States by Texas, Nebraska, Kansas, and Colorado.
In Canada, Alberta is the dominant beef
producer, supplying 65 percent of the total
market.

While the prominence of the Great Plains in
cattle and wheat production is dictated by the
characteristics of the land and climate, its relative
strength as a food processing-manufacturing
region is dictated by economics. Food
processors-manufacturers must decide about
locating near farm production or near consumer
markets. Although the Great Plains is an
important region for agricultural production,
its sparse population makes it a relatively small
consumer market. For example, according to
the U.S. Census Bureau, Kansas, Nebraska,
Montana, South Dakota, and North Dakota
rank thirty-second, thirty-eighth, thirtyninth,
forty-third, and forty-eighth, respectively,
in 1998 population estimates. The Prairie
Provinces of Canada reflect a similar pattern.

The location of agribusiness processing-manufacturing
depends on the costs of transporting
farm products to the plant versus
finished products to the consumer. If the
commodity is bulky and relatively low value
compared to the final product, processing-manufacturing
will more likely be located near
the commodity source. With respect to this
economic rule, the two primary commodities
of the Great Plains, wheat and cattle, are quite
different.

Until the 1950s, flour mills were usually built
near growing regions because the rail charge to
ship wheat versus flour was about the same.
Since then, the rates for shipping flour have
risen, relative to the rates for shipping wheat,
so more modern milling operations tend to be
found near major population centers throughout
North America and hence outside the
Plains.

Processing of the other major Great Plains
commodity, beef cattle, is the dominant agribusiness
processing-manufacturing concern
in the region, again dictated by economics. It is
much less costly to ship processed meat than it
is to ship live animals. The beef-processing
industry is highly concentrated, with the top
four firms accounting for approximately 80
percent of the fed cattle slaughtered in the
United States. These four firms–IBP, Cargill's
Excel, ConAgra's Monfort, and Farmland–are
among the most prominent Great Plains firms
in any industry. IBP has major plants in Emporia
and Finney County, Kansas, in West
Point and Lexington, Nebraska, in Amarillo,
Texas, and in Brooks, Alberta. Monfort's main
plants are in Greeley, Colorado, Garden City,
Kansas, Dumas, Texas, and Grand Island, Nebraska.
Excel has plants in Friona and Plainview,
Texas, Dodge City, Kansas, Fort Morgan,
Colorado, Schuyler, Nebraska, and High River,
Alberta, and Farmland's main processing centers
are in Liberal and Dodge City, Kansas. Beef
represents one of the largest export products
from the Great Plains. For example, in 1998 the
export value of beef from the United States was
$2.3 billion, representing approximately 10
percent of total beef sales, and most of that beef
came from the Plains.

Because of their interdependence, the future
of agribusiness and of the Great Plains region
go hand in hand, and there are significant
changes on the horizon. First, like many industries,
all sectors of agribusiness are concentrating,
resulting in fewer, larger entities. This
holds from the farm to the processing plant to
the grocery store. Second, as the impact of
technology on agribusiness grows, the need for
more educated employees also grows. Genetic
engineering and precision farming are two
prominent examples. Finally, the agribusiness
industry must continually adapt to its ultimate
customers, who are constantly in flux. Given
shifting consumer demographics and dynamic
societal influences, change will be the only
constant facing the agribusiness industry as it
seeks to continue to meet the needs of consumers.